The Motley Fool

Slater & Gordon Limited warns shareholders its shares are overvalued

Many investors may have forgotten that personal injury law firm Slater & Gordon Limited (ASX: SGH) still trades on the ASX after the law firm was forced into a debt-for-equity rescue plan in order to avoid insolvency.

Shareholders who clung on through the catastrophic consequences of the $1.3 billion Quindell acquisition have been all but wiped out anyway, after the restructure involved a 1-for-100 share consolidation, with the implied value of the post consolidation equity around 30 cents to $1.10 per share.

In other words the original scrip was left valued at between o.3 cents and 1.1 cents for shareholders who rode it all the way to the bottom.

As a result of the restructure the free float is limited with nearly all of the company now in the private hands of U.S. distressed debt specialists, with even Slater & Gordon itself flagging to investor that the exchange traded scrip currently changing hands at around $3.13 is not in line with KPMG’s valuation of 30c to $1.10 – still SGH’s shareholders always were of an optimistic disposition.

Slater & Gordon is also probably the only listed company in the world to warn shareholders its scrip is overvalued, with anyone wanting to take it fully private having a vested interest in a lower “share market” valuation.

On an operational basis Slater & Gordon has now sold off what it could of its UK operations, which resulted in a statutory profit after tax of $113.7 million, although for continuing operations it reported a net loss after tax of $31.9 million on revenue from continuing operations of $159.3 million.

It also has a “net asset position” of $63.3 million, with plans to right-size its Australian operations after a horror couple of years.

I suspect Slater & Gordon won’t remain listed for much longer, given the low volumes, limited free float, and disastrous track record. As such I’d definitely suggest this is a stock to avoid.

In the professional services space you’d be better off looking towards profitable money managers such as Janus Henderson Group (ASX: JHG) or even the likes of trustee business EQT Holdings Ltd (ASX: EQT).

ASX Tech Share – Real Winner from the World Cup

Earlier this year, millions of Australians set alarms and watched the world's biggest sporting event, the World Cup, play out. But did you know there was another Australian representative quietly succeeding as the world watched?

It's the start-up who have positioned themselves as the global leader in sports analytics. Motley Fool's resident tech expert has already upgraded the recommendation of this company's stock to a rating of simply "Buy More".

Click here to access this share. It's completely FREE!

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!